How can your business benefit from the increased Annual Investment Allowance?

Did you know that businesses can claim tax allowances (also known as capital allowances) on certain purchases or investments made on business assets?

If you buy an asset, for example a car, tools, machinery or other equipment, for use in your business, you cannot deduct your expenditure on that asset from your trading profits. However, you may be able to claim a tax allowance (also known as a capital allowance) for that expenditure.The aim is to give tax relief for the reduction in value of qualifying assets that you buy and own for business use by letting you write off their cost against the taxable income of your business.

The Annual Investment allowance offers a tremendous opportunity, not only for your businesses to go ahead with investment decisions, but to stimulate growth in the wider economy, benefiting the UK as a whole. Furthermore, by providing the incentive for businesses to acquire the latest business equipment/plant and machinery, there is an opportunity to improve your competitiveness.

Source: HMRC

What has changed?

On 19 March 2014, in his Budget statement, the Chancellor announced that the AIA limit will increase temporarily from £250,000 to £500,000 per annum with effect from 1 April 2014 for companies and from 6 April 2014 for sole traders/partnerships.

The Chancellor further announced in his Budget Speech on 8th July 2015 that the Annual Investment Allowance will change to £200k with effect from 1st January 2016. The material contained on these pages is currently being updated to reflect this change.

Annual Investment allowance takeaways

  1. AIA Infographic

    A graphical illustration of how the Annual Investment Allowance works

    Still confused? Download our one page infographic for a visual illustration of how AIA can help your business.

    AIA infographic (PDF, 74KB).

  2. Annual Investment Allowance fact sheet

    The Annual Investment Allowance (AIA) Fact Sheet front cover

    Download our guide for more information on:

    • qualifying expenditure
    • which businesses are eligible
    • limitations and key considerations to gain maximum benefit during the qualifying period
    • Detailed examples of how AIA works in practice

    The Annual Investment Allowance (AIA) Fact Sheet (PDF, 37KB).

Comments and reaction

  1. Commenting on the announcement of the temporary increase of the Annual Investment Allowance in the Autumn Statement, Terry Scuoler, Chief Executive of EEF, the manufacturers' organisation, said:

    "The Chancellor demonstrated that he has hands firmly on the levers of growth and is pulling them to support growth which is driven by exports and investment. Today's measures on the annual investment allowance, the headline rate of corporation tax, export support and infrastructure spending have laid the foundations of a strategy to ensure business chooses to invest and grow in the UK. However, the scale of the challenges our economy faces means we must keep our foot on the accelerator. We cannot afford to see further downgrades on growth in output and business investment, and government must therefore set out how its economic priorities are going to drive its spending plans. We have seen how its ambition to double our exports by 2020 has driven concrete action and this clear sense of priorities must now drive the decisions it takes in next years Budget and Spending Review."

    Source: http://www.eef.org.uk

  2. Commenting on the announcement of the temporary increase of the Annual Investment Allowance in the Autumn Statement, the CBI, responded:

    "The Budget will put wind in the sails of business investment, especially for manufacturers. This was a make or break budget coming at a critical time in the recovery and the Chancellor has focussed his firepower on areas that have the potential to lock in growth. It's encouraging to see higher than expected growth in the short-term, but as the Chancellor recognised, tough challenges remain ahead, so it's right that the Budget reflected the fiscal reality. The economy needs to rebalance and this Budget will help businesses hungry to invest and export.

    "The doubling and extension of the AIA will be a shot in the arm for businesses ready to invest and drive the recovery."

    Source: http://www.cbi.org.uk

We recommend you take your own professional advice concerning the validity of this information and the benefit of the Annual Investment Allowance for your business.